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Health gets cheaper, not more expensive

21 Mar 2014

Federal Government claims of unsustainable growth in health spending has been undermined by figures showing the share of tax revenue used to cover health costs is declining.

Health expenditure accounted for little more than 20 per cent of the annual Commonwealth tax take during most of the 2000s and, after spiking above 28 per cent during the height of the GFC – when tax revenues plunged – has slid lower, data compiled by the Australian Institute of Health and Welfare show.

According to figures in the AIHW report Health expenditure Australia 2011-12: analysis by sector, the ratio of Federal Government health spending to tax revenue eased steadily down between 2001-02 and 2006-07, from 22.3 per cent to 20.5 per cent, before surging to 28.6 per cent in 2009-10 (when the tax take plummeted 7.6 per cent).

It has subsequently resumed its long-term decline, dropping to 26.2 per cent in 2011-12, as tax revenues have recovered.

The analysis belies Government claims of an unsustainable spiral in health costs, which it has used to frame discussion of changes to the funding of primary care.

In a major speech last month, Health Minister Peter Dutton said the health system needed to be fundamentally recast if it was to continue to be effective.

Mr Dutton said there was “an opportunity for us to perhaps look at doctors and other stakeholders in the conversation about blended payments”.

The AIHW report found that, since 2001, the Commonwealth has lifted its spending on primary care while scaling back on hospital expenditure, while the states and territories have done the opposite.

Overall, hospitals received around a 40.5 per cent share of total recurrent government spending for the 10 years to 2011-12, while primary care’s share has slid slightly, from close to 40 per cent in 2001-02 to 38.2 per cent in 2011-12.